Legislation to reform debit card swipe fees was passed 10 months ago, but the fight to implement these changes continues on Capitol Hill.
Senators Jon Tester (D-MT) and Bob Corker (R-TN) have introduced legislation that would delay implementation of the Durbin Amendment provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act by calling for further study. Under the Durbin swipe fee amendment, the Federal Reserve has the authority to develop regulations to ensure that swipe fees imposed on debit card transactions are “reasonable and proportional” to the actual cost to process the transaction.
This month, the American Booksellers Association joined with eight organizations, including the Main Street Alliance and the Northern California Independent Booksellers Association, in asking Congressional leadership to oppose any attempt to delay the swipe fee reform set to take effect in July. In a letter dated May 17 to Senate Majority Leader Harry Reid and Speaker of the House John Boehner, the groups urged against “any delay in the implementation of the Durbin Amendment provisions on debit card interchange fees contained in the Wall Street Reform and Consumer Protection Act.”
In addition, ABA e-mailed bookstore members urging them to contact their senators to ask them to oppose any effort to roll back swipe fee reforms. To make it easier, ABA has provided a template letter below that booksellers can adapt and send to their federal lawmakers, or use as a source for talking points during a phone call. (Find your senator here.)
The legislation introduced by Sens. Tester and Corker would delay implementation for 15 months. While no date has yet been set for a Senate vote on the legislation, some supporters of reform expect that the vote will occur soon after the Senate returns from recess, on June 6, as reported by Convenience Store News.
Under the Dodd-Frank Act, the Federal Reserve is tasked with implementing swipe fee reforms, and in December 2010 it issued a Proposed Rule that would set a maximum allowable amount of $0.12 per debit card transaction, regardless of the final sale amount. The Federal Reserve found that the actual cost to financial institutions to process debit cards averaged $0.04 per transaction, yet for years Visa and MasterCard have been charging Main Street businesses much more in order to attract banks to issue their cards.
The Federal Reserve had been expected to issue final rules prior to April 21, 2011. However, on March 29, 2011, Fed Chair Ben Bernanke advised lawmakers that the Board would be unable to meet the April 21 deadline, but that it was committed to meeting the Act’s directive that it issue final rules regarding network exclusivity and routing by July 21. In testimony before the Senate Banking Committee in May, Bernanke said that he did not believe there was any need for further study of the issue. “We have plenty of information,” he replied when asked, “that is not a problem.”
In a recent op-ed piece, Mathtew Shay, the president and CEO of the National Retail Federation (NRF), urged Congress to “stand by last year’s vote and not let banks steal swipe fee reform away.”
Noting that “swipe fees are no small matter,” Shay’s piece pointed out both that the fees “drive prices up by $2 for every $100 purchased” and that “at $427 a year for the average household, U.S. consumers pay the highest swipe fees in the world.”
I am writing to ask you to not co-sponsor and to oppose S. 575, the Debit Interchange Fee Study Act of 2011. This legislation would delay and effectively kill debit card fee reforms scheduled to go into effect this July; reforms that will have a positive impact on my business and ultimately my customers.
For years I have tried to negotiate debit card fee rates and terms of acceptance to no avail. These are one of the fast growing costs I face in my business. This is not just because the volume is rising, but, rather, because the rates are rising, too, despite improvements in technology and economies of scale. The current level of unpredictability and uncertainty in the debit swipe fee market puts a real strain on my ability to budget, plan for my business, and hire new workers.
Last year, Congress passed legislation to provide some relief for me and my customers. I was disappointed then that I would have to wait a year until those reforms would go into effect, but I recognized the need for a deliberative process of writing, reviewing, and enacting those reforms. But now there are some senators and members of Congress who want me to wait two more years so there can be a study of hypothetical reforms, while my rates continue to go up, negatively impacting me and my customers.
As a small business owner, I’m required to compete on price and services every day, but Visa, MasterCard, and the big banks do not. In the midst of the recession last year, networks raised debit card fees tremendously, even as the top 10 banks took in more than half of the $16 billion dollars collected in debit card swipe fees.
Every month that there is a delay in limiting the amount banks and credit card companies charge Main Street businesses translates into another $1.3 billion bailout for Visa, MasterCard, and their big bank allies at the expense of American small businesses and consumers. Consumer groups also agree that a delay of these reforms would be misguided.
I strongly encourage you stand up for Main Street business and consumers by not co-sponsoring S. 575, the Debit Interchange Fee Study Act of 2011, and also opposing any efforts to move this bill in the Senate.